Using FreshBooks to Track Project Profitability

Winning a project does not automatically mean making money from it. Between team hours, billable expenses, scope creep, and invoicing delays, many businesses only discover a project was unprofitable after it has already wrapped up, when it is far too late to course-correct. Tracking profitability while a project is still in progress, rather than after the fact, is what separates businesses that grow steadily from those that keep repeating the same costly mistakes.

This is exactly the gap that FreshBooks is designed to close. As a cloud-based accounting and invoicing platform built with freelancers and small businesses in mind, FreshBooks connects time tracking, expenses, and invoicing directly to a dedicated Project Profitability feature, giving business owners a real-time view of what each project actually earns. In this article, we will walk through exactly how that tracking works, and how partnering with Solution for Guru can help you set it up correctly from the start.

Table of Contents

What Will You Learn in This Article?

Before diving in, here is a quick summary of what this guide covers, so you can jump straight to the section most relevant to your business.

Topic	What You’ll Learn
Why profitability tracking matters	The hidden costs that erode margins on seemingly successful projects
How FreshBooks calculates profit	The formulas behind Billed, Costs, Profit, and Profit Margin
Time tracking and cost rates	How logged hours translate into real project costs
Expenses and markup	How billable and non-billable expenses affect the bottom line
Profitability reports	How the Summary and Details reports differ and when to use each
Team utilization	How capacity tracking connects to profitability
Implementation	How Solution for Guru helps you configure FreshBooks correctly

How Is FreshBooks Related to Project Profitability?

FreshBooks began as an invoicing tool for freelancers, but it has grown into a full accounting platform that many small businesses and agencies rely on to manage clients, teams, and projects in one place. Because it already tracks invoicing, time entries, and expenses, extending that same data into a dedicated profitability feature was a natural next step for the platform.

The Project Profitability feature, available on the Premium and Select plans, pulls together every dollar billed and every dollar spent on a project, then calculates the resulting profit automatically. Rather than exporting data into a spreadsheet after the fact, business owners can check a project’s financial health while work is still underway, which makes FreshBooks directly relevant to any business trying to answer a simple but important question: is this project actually worth the effort?

Why Does Project Profitability Tracking Matter So Much?

Many businesses focus heavily on winning new work and delivering it well, but spend far less time verifying whether that work was financially worthwhile once all the costs are accounted for.

What Costs Quietly Erode Project Margins?

Team hours are often the biggest hidden cost. A project with a flat-rate quote can quietly become unprofitable when it takes twice as long as estimated because you rarely bill the extra hours separately. Beyond labor, expenses such as software licenses, materials, subcontractor fees, and travel costs can also reduce margins, especially when teams fail to track them consistently against the specific project that incurred them.

Why Is Reviewing Profitability After a Project Ends Too Late?

If a business only discovers a project lost money once it is complete, there is no opportunity left to adjust scope, renegotiate pricing, or reallocate team time. By then, the only lesson available is a retrospective one. Real-time profitability tracking, by contrast, allows a business to spot a project heading toward a loss while there is still time to intervene, whether that means having a scope conversation with the client or reassigning tasks to control hours.

How Does This Affect Long-Term Business Decisions?

Beyond individual projects, consistent profitability tracking reveals patterns across an entire client base. A business might discover that certain types of projects are reliably profitable while others consistently underperform, information that directly shapes future pricing, proposals, and which clients to prioritize going forward.

Can Profitability Insights Improve Client Conversations Too?

Profitability data does not only inform internal decisions. When a project starts drifting toward a loss because the client keeps expanding scope without adjusting the budget, having clear figures on hand makes it far easier to have a factual, non-confrontational conversation about a change order or a revised quote. Instead of relying on a vague sense that “this project feels like it’s taking too long,” a business owner can point to specific numbers showing exactly how the added work has affected the budget, which tends to make these conversations shorter and less contentious.

How Does FreshBooks Calculate Project Profitability?

Understanding the underlying formulas helps business owners interpret the numbers correctly rather than just glancing at a dashboard.

What Counts as Billed Income?

Billed income includes all invoiced amounts tied to a project, covering draft, sent, viewed, and paid invoices, as well as flat rate project totals. FreshBooks also displays unbilled income separately, which includes flat rate projects, unbilled time entries, and unbilled expenses, so a business can see not just what has been invoiced, but what is still owed for work already completed.

How Are Costs Calculated?

Costs include two elements: team member costs, which teams calculate by multiplying tracked time by each team member’s cost rate, and expense costs, which cover billed, unbilled, and non-billable expenses but exclude markup. Sales taxes also remain outside cost calculations, except when teams rebill expenses that originally included taxes.

How Is Profit and Profit Margin Determined?

Profit is simply the result of subtracting total costs from total income. Profit Margin takes this a step further, calculated as the difference between income and cost, divided by income, then multiplied by 100 to produce a percentage. If a project has costs but no recorded income yet, FreshBooks displays the margin as unavailable rather than showing a misleading number, which keeps the reporting accurate even for projects still in early stages.

How Does Time Tracking Feed Into Profitability Numbers?

Labor usually drives the largest share of project costs, so teams must track time accurately to calculate profitability correctly.

What Are Team Cost Rates and Why Do They Matter?

A cost rate represents how much a business actually pays a given team member, whether that is an hourly wage, salary equivalent, or contractor rate. FreshBooks uses this rate to convert logged hours into an actual dollar cost, which means setting accurate cost rates for every team member is a prerequisite for trustworthy profitability data. If a rate is missing or outdated, the resulting cost calculation, and therefore the profit figure, will be inaccurate.

How Does Logged Time Translate Into Project Costs?

As team members log hours against a specific project, FreshBooks multiplies that time by the relevant cost rate to determine the labor cost contribution. This process happens continuously, so the project’s cost total updates in real time as teams complete work instead of requiring a manual calculation at the end of each billing cycle.

Why Does Accurate Time Entry Matter More Than It Seems?

If team members are inconsistent about logging their hours, whether they forget entirely or round estimates loosely, the resulting profitability figures become unreliable. A project might appear more profitable than it actually is simply because hours went unrecorded. Building a habit of accurate, timely time entry across the team is one of the simplest ways to make FreshBooks profitability data trustworthy.

How Do Expenses and Markup Affect Project Profitability?

Labor is not the only cost that matters. Expenses tied to a project, and how they are billed back to the client, play a significant role in the final profit calculation.

What Is the Difference Between Billable and Non-Billable Expenses?

A billable expense goes to the client, typically as part of an invoice, while the business absorbs a non-billable expense entirely. FreshBooks tracks both types against a project, which means even costs that never appear on a client invoice still factor into the true profitability picture.

How Does Expense Markup Work?

When a business rebills a billable expense to a client, it can apply a markup and charge more than the original cost to cover handling, overhead, or profit margin. FreshBooks excludes this markup from the cost calculation because it treats the markup as additional income rather than an expense the business incurred.

Should Every Expense Be Rebilled to the Client?

Not necessarily. FreshBooks allows businesses to decide whether a given project-related expense gets billed back to the client or absorbed internally. This flexibility matters because some costs, such as internal tools or general overhead, are simply part of doing business and should not appear on client invoices, while others, like project-specific materials, often make sense to pass along.

How Do Project Estimates Fit Into Profitability Tracking?

Profitability tracking is not only useful once a project is underway. It also plays an important role at the very beginning, when a business is deciding how to quote a project in the first place.

Why Does an Accurate Estimate Matter Before Work Even Starts?

An estimate that undervalues the time or resources a project will require sets a business up for a loss before a single hour of work begins. FreshBooks lets businesses create project estimates based on expected services and expenses and compare those estimates with actual results after completing the project. Over time, this comparison reveals whether a business is consistently underestimating certain types of work, information that is difficult to see clearly without structured historical data.

How Does Comparing Estimates to Actuals Improve Future Quoting?

Once a project wraps up, reviewing how the final profitability numbers compare to the original estimate highlights exactly where assumptions were off. Perhaps a particular service consistently takes longer than expected, or teams routinely underestimate certain expense categories. Feeding these insights back into future quotes helps a business gradually tighten its estimating accuracy, which directly protects margins on the next project of a similar type.

What Role Do Flat Rate Projects Play in This Process?

For businesses that quote flat rate projects rather than billing hourly, profitability tracking becomes even more important, since there is no built-in mechanism to recover costs if a project runs long. FreshBooks still tracks all logged hours and expenses against a flat rate project, allowing a business to see the true cost of delivering that work even though the client invoice remains fixed. This visibility is often the only way a business discovers that a flat rate offering needs to be repriced going forward.

What Reports Does FreshBooks Offer for Reviewing Profitability?

Beyond the at-a-glance profitability figures on a project page, FreshBooks provides two dedicated reports for deeper analysis.

Report	What It Shows	Best Used For
Profitability Summary	Overview of profitability across all of a client’s projects	Comparing performance across multiple projects at once
Profitability Details	Breakdown of services and expenses tied to a single project	Understanding exactly where income and costs originate
Profitability Widget	At-a-glance snapshot of income, costs, profit, and unbilled hours	Quick daily or weekly check-ins on project health

How Does the Profitability Summary Report Help With Comparisons?

The Summary report lets a business view profitability across every project tied to a specific client, side by side. This makes it easy to spot patterns, such as one recurring project type consistently outperforming another, which can inform future pricing conversations with that client.

What Makes the Profitability Details Report Useful?

The Details report goes further, breaking down exactly which services and expenses contributed to a project’s income and costs. Selecting a specific service or expense line within the report drills down into the underlying time entries or expense records, giving business owners the ability to trace a profitability issue back to its exact source rather than guessing.

Why Is the Profitability Widget Convenient for Regular Check-Ins?

For business owners who do not need a deep dive every time, the Profitability Widget offers a fast, at-a-glance summary directly on the project page, showing income, costs, profit, and unbilled hours without navigating to a separate report. This makes it easy to build profitability review into a regular weekly routine rather than treating it as a quarterly exercise.

How Does Team Utilization Connect to Project Profitability?

Profitability is not only about what happens on a single project. It also depends on how effectively a team’s overall capacity is being used.

What Is Team Capacity in FreshBooks?

Capacity refers to the number of billable hours a team member is expected to work on a weekly basis. Setting this figure accurately for each team member allows FreshBooks to calculate a meaningful utilization rate, rather than comparing logged hours against an arbitrary standard.

How Does the Team Utilization Report Support Better Staffing Decisions?

By comparing actual billable hours logged against expected capacity, the Team Utilization report reveals whether team members are being used efficiently. A consistently low utilization rate might indicate too much time spent on non-billable work, while a consistently high rate could be an early warning sign of team burnout or overcommitment.

Why Does This Matter for Profitability Beyond a Single Project?

A team member who is underutilized represents a cost the business is absorbing without generating proportional income. Conversely, a team stretched too thin across too many billable hours risks quality issues that can hurt client relationships. Balancing utilization alongside profitability data helps a business make staffing and hiring decisions based on real numbers rather than instinct alone.

What Common Mistakes Undermine Profitability Data in FreshBooks?

Even with the right features enabled, a few recurring habits can quietly distort the profitability numbers a business relies on for decision-making.

Why Does Skipping Time Entries Cause Bigger Problems Than It Seems?

When a team member forgets to log hours, or logs them against the wrong project, the resulting cost figure understates the true labor investment. A project may appear profitable simply because the team failed to record all the time spent on it. This creates a false sense of security and can later hurt the business when teams use inaccurate historical data to quote similar projects.

How Does Inconsistent Project Naming Create Confusion?

Businesses that create duplicate or inconsistently named projects for the same client engagement end up splitting profitability data across multiple records instead of one clear picture. This makes the Summary and Details reports much less useful because teams can compare project performance effectively only when they structure projects consistently from the start.

Why Do Outdated Cost Rates Skew Every Calculation Downstream?

FreshBooks calculates costs by multiplying logged hours by each team member’s cost rate. If the team fails to update that rate after a raise or a change in contractor pricing, FreshBooks will produce inaccurate cost figures for every project involving that team member. Reviewing and updating cost rates on a regular schedule, rather than setting them once and forgetting about them, keeps profitability data trustworthy over time.

What Steps Should a Business Take to Start Tracking Project Profitability?

Getting started with profitability tracking in FreshBooks involves a few foundational steps that set the stage for accurate, useful data.

Confirm your plan includes Project Profitability. This feature is available only on FreshBooks Premium and Select plans.
Set accurate cost rates for every team member. Without correct rates, labor cost calculations will not reflect reality.
Create a project for each engagement. Assign time entries and expenses to the correct project consistently.
Decide which expenses are billable. Establish a clear policy for what gets rebilled to clients versus absorbed internally.
Set team member capacity. This enables accurate utilization tracking alongside profitability figures.
Review reports on a regular cadence. Check the Profitability Widget weekly and run Summary or Details reports monthly.

Why Does Consistency Matter More Than Perfection When Starting Out?

A business does not need flawless historical data to begin benefiting from profitability tracking. What matters more is establishing consistent habits going forward, logging time promptly, categorizing expenses correctly, and reviewing reports on a set schedule. Over time, this consistency produces increasingly reliable data that supports better business decisions.

Why Should Your Business Use FreshBooks to Track Project Profitability?

Guessing at whether a project made money is no longer necessary. Through automated time tracking, expense categorization, and dedicated profitability reports, FreshBooks gives business owners the real-time visibility needed to catch unprofitable projects early, rather than discovering the damage only after invoicing is complete. Instead of reacting to a disappointing year-end review, businesses using FreshBooks can adjust course while a project is still in progress.

Just as importantly, this same data supports smarter decisions well beyond any single project, informing pricing strategy, staffing decisions, and which clients are worth prioritizing in the future. For businesses serious about protecting their margins, project profitability tracking is not an optional extra; it is a core part of running a sustainable operation. Moving away from spreadsheets and end-of-year guesswork toward a connected, real-time system inside FreshBooks gives business owners the confidence to make pricing and staffing decisions backed by actual data, rather than assumptions carried over from one project to the next.

Frequently Asked Questions

Do I Need a Specific FreshBooks Plan to Track Project Profitability?

Yes. Project Profitability features, including capacity tracking, cost rates, project estimates, expense markup, and the profitability reports themselves, are only available on FreshBooks Premium and Select plans, so businesses on lower-tier plans will need to upgrade to access this functionality.

How Often Should I Check My Project Profitability Reports?

There is no single right answer, but many businesses find success reviewing the Profitability Widget weekly for a quick pulse check and running the full Summary or Details reports monthly to catch broader trends across clients and project types before they significantly affect the bottom line.

Can FreshBooks Show Profitability for Projects That Are Still in Progress?

Yes. FreshBooks continuously updates income and cost data as teams log time and record expenses, so profitability figures change in real time instead of appearing only after teams fully invoice and close a project. This real-time visibility helps businesses identify problems while they still have time to act. It also gives FreshBooks a practical advantage over traditional accounting methods, which often calculate profitability in hindsight, long after corrective action could have made a difference.

How Can Solution for Guru Help You Get the Most Out of FreshBooks?

Turning on Project Profitability is straightforward, but configuring it correctly, setting accurate cost rates, structuring projects consistently, and integrating FreshBooks with other business systems, takes more thought than many businesses initially expect. This is where partnering with Solution for Guru adds real value.

What Does Solution for Guru Bring to a FreshBooks Setup?

Solution for Guru specializes in CRM, payroll, and project management software integration, giving them direct experience connecting platforms like FreshBooks with the other tools a business already relies on. Rather than leaving cost rates, project structures, and expense categories set to defaults, their team helps configure these details around your business’s actual workflow.

How Does Expert Configuration Improve the Accuracy of Profitability Data?

Since profitability calculations depend entirely on accurate underlying data, a small setup mistake, such as an outdated cost rate or inconsistent project naming, can throw off reports significantly. Working with an experienced integration partner ensures these foundational details are correct from day one, so the numbers you see in FreshBooks actually reflect reality.

What Long-Term Value Does This Partnership Offer?

As a business grows and takes on more clients, projects, and team members, keeping FreshBooks configured correctly becomes more complex. Solution for Guru‘s broader expertise in CRM and SaaS integrations means your FreshBooks setup can scale alongside your business, whether that means connecting additional tools, refining reporting workflows, or training new team members on best practices for accurate data entry.